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Mortgage Broker Practices Score Well on Regulator Suitability Report

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TORONTO, Sept. 8, 2014 /CNW/ – A report from the Mortgage Broker Regulators’ Council of Canada (MBRCC) should help bolster the confidence borrowers have in the services being provided by mortgage brokers in Canada. The report indicates that most mortgage brokers work to direct their residential clients toward suitable mortgages. However, the report also notes that there is still room for improvement in a number of areas.

Canada’s mortgage broker regulators have identified mortgage suitability as a priority and a concern that is shared across the provinces. “Unsuitable mortgages can have a devastating financial impact on borrowers and their families,” MBRCC Chair Kirk Bacon said. “We’ve also seen national economies around the world suffer when too many households are stuck with unsuitable mortgages.” The report confirms that mortgage brokers have an important role in ensuring that the mortgages Canadians receive are suitable.

The MBRCC met with a number of industry associations to map out the role and activities of mortgage brokers in new residential mortgage transactions. They gathered information to develop a benchmark understanding of the processes and practices mortgage brokers ought to employ to ensure the mortgage advice and options they provide are suitable for their clients.

The MBRCC then conducted a survey of mortgage brokers with regulators in Alberta, Newfoundland & Labrador andOntario reaching out to select brokers to participate. The survey was designed to determine how closely current practices align with the benchmark. Participants were questioned on a variety of topics, including assessing a client’s need and circumstances, developing product option(s) and disclosures. According to the report, the vast majority of the 1,113 brokers surveyed have adopted practices that are integral to providing suitable options and advice to mortgage consumers.

“We now have a much clearer picture of what mortgage brokers are doing to help ensure the suitability of new residential mortgages,” Bacon stated, noting that the report was viewed as the foundation for future collaborative efforts among the regulators. “The MBRCC plans to build out from it to further our work in protecting Canada’smortgage consumers and improving the marketplace.”

The report is one of a series of successful collaborative efforts for the country’s provincial mortgage broker regulators. Since its establishment in 2012, MBRCC members have worked together to identify common concerns, develop shared solutions and harmonize the regulatory landscape. Included in the efforts already completed by the MBRCC are standardized risk disclosure materials for consumers in all provinces, competency and curriculum requirements for all mortgage broker licensing courses and an online tool to assist brokers in identifying the possible licensing and registration rules for transactions that cross provincial borders. MBRCC members are also currently working together to develop national licensing education standards and a harmonized course accreditation process.

About MBRCC

The MBRCC is an inter-jurisdictional association of mortgage broker regulators that seeks to improve and promote harmonization of mortgage broker regulatory practices to serve the public interest. Its members work together and with stakeholders to identify trends and address common regulatory issues through national solutions that support consumer protection and an open and fair marketplace.

MBRCC members represent the nine provinces that currently have legislative and regulatory frameworks governing mortgage brokers or have an interest in developing one; British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Nova Scotia and Newfoundland & Labrador.

Learn More

Mortgage Brokering Product Suitability Review: Link

MBRCC Homepage: www.mbrcc.ca

MBRCC Newsletter: Link

SOURCE Mortgage Broker Regulators’ Council of Canada

For further information: English Contact: Martin Boyle, Mortgage Broker Regulators’ Council of Canada,Martin.Boyle@fsco.gov.on.ca, 416-590-7031; French Contact: Stéphanie Fournier, L’Organisme d’autoréglementation du courtage immobilier du Québec, sfournier@oaciq.com, 1-800-440-7170 ext. 8693

Here’s Why Mortgage Credit Growth In Canada Has Been Slowing

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The latest reading from Statistics Canada shows that Canadian household indebtedness increased in the second quarter, with the ratio of household credit market debt to disposable income rising from 163.1 to 163.6 percent.

This increase was primarily attributable to weak income gains over the course of the quarter, as mortgage debt – which makes up nearly two thirds of total household credit – grew at its slowest annual clip since Q3 2001.

In a new note, TD economist Diana Petramala explains why mortgage credit growth has been on the decline.

“Simply speaking, outstanding mortgages are calculated as total outstanding mortgages, plus new mortgages less principal repayment,” she writes. “As long as new mortgages are higher than principal repayments, outstanding mortgage balances will grow.”

Canadians, according to Petramala, are taking advantage of ultra-low interest rates to make substantial progress on paying down their principals:

via TD Economics“Evidence suggests that households are taking an active approach to debt management by paying down their principal more aggressively and drawing less equity from their homes for consumption purposes,” Petramala writes. “Canadian households are paying roughly $4 billion dollars less in interest on an annual basis than they were heading into the recession, but on the flip side they are paying that much more in principal.”

The second half of this development has to do with changes in the average size of the down payment made when purchasing a home, which determines whether a mortgage is conventional (down payment of at least 20 percent) or insured (down payment of less than 20 percent).

The data signal that homebuyers aren’t maximizing the amount they could borrow from a bank, but rather, are choosing to have a higher amount of equity in their property at the time they move in:

via TD Economics“We see that insured mortgages are falling off a cliff while uninsured mortgages are rising,” Petramala told us. “This suggest that a larger share of homebuyers are taking on less debt when purchasing a property.”

Update: North Cove’s Ben Rabidoux points out that the drop-off in insured mortgages can be largely attributed to the decrease in bulk insurance origination from the Canada Mortgage and Housing Corporation, and less so to larger down payments.

The perpetual strength of Canada’s housing market, with the MLS Home Price Index showing that home prices have been rising by 5 percent year-over-year throughout 2014 (compared to an average of 2.8 percent in 2013), is hard to square with a decline in mortgage credit growth. But this report provides a rather compelling explanation for how this has been able to occur:

1) Homebuyers (both first-time and those downsizing or upgrading) continue to fuel credit mortgage growth, and in turn, home price appreciation. However, their average loan-to-value ratio has decreased, in other words, these borrowers are behaving more prudently, and that has kept a lid on mortgage credit growth.

2) Existing homeowners electing to aggressively pay down their principal has offset the growth in new mortgages (and total mortgage credit) more than it did during the period immediately preceding and following the financial crisis.

Petramala’s note implies that this time really is different; that the current situation in Canada is not an apples-to-apples comparison to that of the United States prior to the massive housing bust that brought the global economy to its knees.

Despite this encouraging trend of slowing mortgage credit growth, the economist warns that “the lure of low interest rates may prove to be too strong for Canadian consumers, and the potential for a reacceleration in debt growth remains high.”

READ MORE: How Is Canada’s Housing Market Getting Stronger While The Labour Market Deteriorates?

SEE ALSO: Should Canadian Households Get The Gold For Debt Management?

DON’T MISS: Here’s Why Canadian Consumer Spending Remains Buoyant, But Won’t Stay That Way For Long

Tags:Canada household debt, Canada housing bubble, Canada housing market, Canada mortgages, Diana Petramala

From $99,999 to $1-million plus: Here’s what Canadians can buy in Florida real estate

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Lured by bargain prices, Canadians spent $2.2-billion on Florida property last year, making them the state’s No. 1 foreign buyer of real estate.

Half of all Canadian buyers, most of them paying cash, spent less than US$200,000 — about half the average sale price of a home here last month. Only 16% of Canadians paid more than $400,000 for their Florida homes.

Canadians were behind 31.6% of all international transactions, according to a report Tuesday by the National Association of Realtors for Florida. And so far the lower Canadian dollar hasn’t affected sales.

Here’s a look at what the price range of just under $100,000 to over $1-million will buy in the Sunshine State:

Handout

$99,999 or less: A townhouse in Ft. Myers, Fla., selling for $99,999.

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$100,000 to $199,999: A two-bedroom house in Ft. Myers selling for $150,000.

$200,000 to $299,000: House for sale in North Ft. Myers for $250,000.

$300,000 to $399,999: House in Ft. Myers selling for $395,000.

Handout

$400,000 to $499,999:: Three-bedroom, two-bathroom house in Ft. Myers selling for $475,000.

Handout

$500,000 to $749,999: House in Naples selling for $749,000.

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$750,000 to $999,999:: Five-bedroom, four-bathroom house in Fort Myers selling for $850,000.

Handout

$1,000,000 or more:: House for sale in Naples for $5,700,000.

Renewing your mortgage? Here’s why you should pick up the phone

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Twitter Google+ LinkedIn Email Comments More It is mortgage renewal time in my house.

Freedom 58? How Canadians are shaving thousands off the cost of their mortgage

More than half of Canadians in a new survey are putting extra effort into repaying their mortgages — saving tens of thousands in interest payments. Find out more I am one of those debt loving people who believe I can do more with my money by carrying a big debt at 3%, than by paying off my house and using up all that cheap capital – but that financial idea is a story for another column.

So, even though my mortgage comes due in October, I decided to lock in a rate four months earlier at a different institution at 2.79% for 5 years fixed. I was thrilled to have another five years of cheap money.

Even though I had already locked in elsewhere, I was interested in what my current mortgage lender would provide. I waited and I waited. Just four weeks before it was due for renewal they sent me a mortgage renewal notice. They could have sent it to me two or three months before my mortgage came due, but they may prefer to leave consumers less time to shop around and more inclined to just renew.

Related CMHC could force banks to pay deductibles on mortgage insurance Thinking about a move-up buy? Forget it, new study says you can’t afford it ‘I felt really trapped’: Tiny houses big with U.S. consumers seeking economic freedom Here is where it gets interesting. “Please indicate which option you are accepting by signing your initials in the appropriate area indicated and return your signed agreement,” the letter stated.

I could just initial the 5-year fixed rate — for the princely rate of 4.79%.

Further on in the letter under a section called “Get the best rate,” it offered to extend to you our special interest rate hold guarantee provided if I signed by my renewal date. But all this says is that if the rate went down between now and about three weeks from now, I would get the lower rate.

This is a full 2% higher than what I am actually going to get somewhere else. If I had a $500,000 mortgage, this would cost me $47,600 more over 5 years by ‘just signing here’ vs. going to a mortgage broker three months in advance.

Just to be sure that I wasn’t missing something I called to make sure that I had the correct instructions and rate on my renewal. An interesting thing happened when I called. In about 30 seconds they said “I can actually get you a rate of 2.99% for 5 years.” I asked why my rate was 4.79%, and they said that this is the standard rate, but I can get this better special rate.

Doing the math, that phone call, using the same $500,000 example, would have saved me $42,800 over 5 years. That was a pretty valuable phone call.

I asked the kind sir on the phone how often people just sign the renewal form, and he said ‘quite a few.’

If a bank gets 5,000 people in the same $500,000 example to sign the renewal, that adds $42.8-million in profit to their bottom line each year.

Please do not automatically sign the friendly mortgage renewal form. At a minimum call to negotiate or call a mortgage broker to get the best deal for you. If you feel some sort of loyalty to your current mortgage provider, then be sure to see someone in person and ask for the very best rate that they give their very best customer. Your future net worth will be glad that you did.

Ted Rechtshaffen is president and wealth advisor at TriDelta Financial, a boutique wealth management firm focusing on investment counselling and estate planning. tedr@tridelta.ca

Chinese developer Greenland makes its first purchase in Canada — a Toronto condo project

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Greenland Holding Group Co., a Shanghai-based developer owned by the Chinese government, said it bought King Blue, a two-tower condominium project in Toronto, its first purchase in Canada.

Greenland Holding bought the planned development, which includes 44 and 48-story towers, from closely held Easton’s Group of Hotels Inc. and The Remington Group Inc. for at least $100 million, according to Easton’s Chief Executive Officer Steve Gupta.

Immigration is a main factor driving demand, Gupta, the India-born founder of Toronto-based Easton’s, said by phone today. Greenland Holding, which has invested in London’s Canary Wharf and New York’s Pacific Park, said it bought the site as an entry-point to Canada’s housing market where existing home sales reached a four-year high in August. Average Toronto condominium prices rose 5.5% to $367,010 in the second quarter over a year ago and sales advanced 10%.

“We believe this city will continue to grow and thrive creating other investment opportunities for Greenland Group (Canada) in the Greater Toronto Area and beyond,” Greenland Holding Chairman Yuliang Zhang said in the statement.

The King Blue project, which includes a former Westinghouse factory built in 1927, is located on King Street West, amid newly-opened bars and the TIFF Bell Lightbox Theatre which hosts the annual film festival. The 44-storey tower is 85% sold, according to Gupta. The second tower, hasn’t been pre-leased yet.

Bloomberg.com

How Brokers Operate – some stats -ask a Vancouver mortgage broker

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How Brokers Operate: Some Stats

POSTED IN: MORTGAGE INDUSTRY REPORTS SEPTEMBER 13, 2014 ROBERT MCLISTER 3 COMMENTS The vast majority of mortgage brokers recommend suitable mortgages, according to a new report from the Mortgage Broker Regulators’ Council of Canada (MBRCC). That’s vital because, as MBRCC Chair Kirk Bacon states, “Unsuitable mortgages can have a devastating financial impact on borrowers and their families.” To find out how brokers operate, regulators surveyed 1,113 of them in Ontario, Alberta and Newfoundland. They discovered practices that were mostly reassuring, with a few stats you may find surprising.

These were some key findings:

55% of Ontario brokers said brokering wasn’t their primary source of income Note: The number was only 11% in Alberta and 25% in Newfoundland It would be interesting to know how many consumers are willing to entrust their biggest debt to a part-timer 53% of brokers maintain records of why they make the recommendations they do That’s a problem, regulators say. “…There should be written records” of how the broker’s recommendation corresponds to his/her needs assessment of the borrower, notes the MBRCC 34% of brokers have been licensed for at least five years In other words, only about 1 in 3 brokers have had clients renew a 5-year mortgage This stat primarily includes Ontario brokers (Alberta was excluded from this question) Out of active Ontario brokers, only 1 in 3 do more than 25 mortgages per year 81% of brokers say they “always” search for suitable mortgages from the lenders available to them 69% of Ontario brokers use more than three lenders “on a regular basis” (76% in Alberta) 7% of Ontario brokers use only one lender on a regular basis (and they call themselves brokers?) 40% of brokers do independent research on mortgage products “daily” 2 in 3 Ontario brokers say they represent “both” the lender and borrower 30% say they represent only the borrower 4% say they represent only the lender (if only these brokers admitted that to clients) The MBRCC outlines three factors in recommending a suitable mortgage:

Appropriateness of the mortgage, given the borrower’s needs/circumstances Affordability of the mortgage, given the person’s ability to repay it Alternatives available to the broker Some consumers are under the misconception that brokers recommend mortgages from all lenders. Very few do. In fact, the majority (53%) of brokers say their role is only to educate clients on the mortgages they, the broker, can directly sell While regulators don’t expect brokers to know all products, they do, however, expect brokers to recommend the most appropriate mortgage that they have access to One other key takeaway from the report involves setting expectations. The MBRCC says it’s vital for brokers and customers to have “a common understanding” about the type of product(s) or advice being provided by the broker. You don’t want a situation where clients think they’re getting objective advice but the broker does 80% of his/her business with one lender. Disclosure is everything.

So, what can consumers draw from all this? Well, there are always exceptions and other criteria apply, but if you’re looking for the best possible service and advice, odds are you’ll get it from a broker who:

Makes brokering their full-time income source Has been in the business for at least five years (or is under the direction of a broker who has) Compares all of their lenders to see which offers the most suitable mortgage (or knows which do, without needing to compare) Documents why they make the recommendations they do Regularly uses more than 3 lenders Follows the rate and mortgage market daily Does a comprehensive assessment of the borrower’s needs and mortgage affordability Believes they represent the borrower, but recognizes their obligation for full disclosure to the lender

Sidebar: Here’s more on the report if you’re interested: Link

The MBRCC says it is also “currently working together to develop national licensing education standards and a harmonized course accreditation process.” That’s a sensible move that should eliminate untold overlap in the licensing process, as well as inefficiencies that prevent brokers from operating across the country.

Canada housing market shows no sign of slowing as prices rise for 9th month: Teranet

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TORONTO — Canadian home prices rose in August and the pace of 12-month home price appreciation accelerated, a report showed on Friday, suggesting robust demand for housing is carrying through to the second half of the year.

Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market

The downside of this latest wave of Chinese cash is it’s also driving up costs elsewhere in a city which already ranks as North America’s least affordable markets. Read on The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes, showed national home prices rose 0.8% last month, exceeding the historical average for August.

Prices were up 5.0% from a year earlier, a pickup from July’s 4.9% price gain.

August was the ninth month in a row in which the composite index did not fall. The price increases, on top of robust housing starts data in the spring and summer, have surprised economists who have been calling for a slowdown in Canada’s long housing boom.

Related Bank of Montreal lowers five-year fixed mortgage to 2.99% Canada building permits soar to record on Toronto, Vancouver condos Thinking about a move-up buy? Forget it, new study says you can’t afford it David Tulk, chief Canada macro strategist at TD Securities, said the report suggests the momentum in the housing market has continued into the second half of the year.

“While a gradual drift higher in interest rates should limit the degree to which housing can continue to increase, a persistent low rate environment will prevent a more pronounced correction,” Tulk said in a research note.

“The housing market will also remain on the Bank of Canada’s radar and the strength we have seen buttresses the case to resume the withdrawal of stimulus once the improved international backdrop has provided a sufficient lift to net exports,” he added.

Canada’s central bank is not expected to raise rates until the second half of 2015.

Canada escaped the U.S. housing crash that accompanied the 2008-09 financial crisis, and home prices have risen sharply, if not steadily, over the past five years despite moves by the federal government to tighten mortgage lending rules.

The Teranet data showed prices rose in August from the month before in 10 out of 11 cities, led by a 1.8% gain in Winnipeg, a 1.5% gain in Ottawa and a 1.2% rise in Toronto.

Prices were down 0.7% in Montreal.

Year-over-year price gains were also seen in 10 of the 11 cities surveyed.

Compared with a year earlier, prices were up 7.9% in Calgary, 4.5% in Edmonton, 0.9% in Halifax, 6.7% in Hamilton, 1.1% in Montreal, 1.2% in Ottawa, 6.7% in Toronto, 6.1% in Vancouver, 2.1% in Victoria and 1.9% in Winnipeg.

Prices compared with a year earlier were down 0.1% in Quebec City.

© Thomson Reuters 2014

Home prices up, blame it on Toronto, Vancouver and Calgary

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Three of the country’s most expensive housing markets continue to drive the national average price for a home, according to a new report.

Thinking about a move-up buy? Forget it, new study says you can’t afford it

You’re likely stuck in your current home because of new tougher mortgage regulations and ever-rising prices in the Canadian real estate market. Read on The Canadian Real Estate Association said Monday the average sale price of a home in August reached $398,618, a 5.3% increase from a year ago.

“Although activity rose in fewer than half of local housing markets in August, the national tally was fuelled by monthly increases in Greater Vancouver, Calgary and Greater Toronto,” the Ottawa based group said in a release.

The big three continue to see prices rise while their sales continue to increase, both factors helping to drive national numbers. Year-to-date, Vancouver sales are up 18% year over year while Toronto and Calgary are up 4.2% and 13.% respectively.

Related Canada housing market shows no sign of slowing as prices rise for 9th month: Teranet Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market, realtors say Added together, the three cities are responsible for 33% of all sales in the country this year. However, the dollar value of the trades year-to-date have so far been worth about 48% of all activity.

“Sales picked up in some of Canada’s most active and expensive real estate markets which fuelled another national increase,” said Beth Crosbie, president of CREA, in the release. “Even so, the national increase in sales does not reflect local trends in many markets across the country.”

Prices were down in August from a year ago in six of the markets surveyed. Another eight markets were near the rate of inflation, in terms of price increases.

For August, national sales were up 1.8% from July and 2.1% from a year ago. It was the seventh consecutive month sales have grown and the highest level for sale since January, 2010.

“Sale activity in recent months has remained stronger than was anticipated earlier this year,” said Gregory Klump, chief economist with CREA, in a statement. “Listings and sales this spring were deferred due to unseasonably harsh weather which subsequently supported activity once the delayed spring home buying season got into gear. This trend was reinforced by a decline in mortgage interest rates.”

Mr. Klump said the boost from deferred sales will not continue and noted sales were down from the previous month in a majority of Canadian markets.

Supply continues to be constrained led by Toronto where new listed homes were down 1.2% in August from July. New listings were down from a month ago in about 60% of the markets surveyed by CREA.

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Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market, realtors say

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VANCOUVER — Chinese investors’ global hunt for prime real estate is helping drive Vancouver home prices to record highs and the city, long among top destinations for wealthy mainland buyers, is feeling the bonanza’s unwelcome side-effects.

Thinking about a move-up buy? Forget it, new study says you can’t afford it

You’re likely stuck in your current home because of new tougher mortgage regulations and ever-rising prices in the Canadian real estate market. Read on The latest wave of Chinese money, linked in part to Beijing’s anti-graft crackdown, is flowing into luxury hot spots. But it has also started driving up housing costs elsewhere in a city which already ranks as North America’s least affordable urban market.

For decades Vancouver, along with Hong Kong, Sydney and Singapore and more recently New York and London has been attracting Chinese and other Asian buyers.

And just like those other cities, Vancouver got caught in the most recent buying frenzy, which realtors say has intensified after President Xi Jinping announced his anti-corruption crusade in late 2012.

“In the last year there’s been the corruption crackdown in China and a lot of people have seen their wealth evaporate over there because of that,” said Dan Scarrow, a vice president at MacDonald Realty. “So they want to put it somewhere they perceive as safe and there’s nowhere safer than the west.”

Related Secret path revealed that allows wealthy Chinese to transfer billions overseas by buying pricey property in Vancouver, New York and Sydney Vancouver’s housing market is the second least affordable in the world, survey finds

Canadian PressThe impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs. Canada does not track foreign property buyers, but analysis of city assessment data carried out by a leading urban planner and made available to Reuters helped identify Vancouver’s hottest neighbourhoods. Interviews with realtors active in those areas confirmed the perception that Chinese buyers were largely behind the latest rally.

My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China Andy Yan of Bing Thom Architects found that values for detached homes in the $2-5 million range have risen by 49% since 2009, making it the fastest growing segment in Vancouver’s housing market. Home values in a handful of luxury enclaves in Vancouver’s west climbed more than 50% over that period, driving city-wide values up more than 35%.

Realtors are saying that more than half of buyers in prime markets are mainland Chinese.

“My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China,” said realtor Malcolm Hasman, a partner at Angell Hasman and Associates. Hasman said Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more.

The impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs.

Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens are standard in most new homes

Getty ImagesAn Asian buyer visits a show apartment of the central luxury real estate complex in Vancouver, Canada. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes. However, its headaches might offer a glimpse of things to come for other world cities that attract global capital.

Sales volumes for detached luxury homes soared in Vancouver by 38% in the first half of 2014 compared with the year earlier period, led by properties valued at or above $2 million, according to a report by Sotheby’s International Realty Canada.

“Foreign investors are competing with other wealthy Canadians and there’s a lot of demand,” said Ross McCredie, chief executive of the luxury-focused realty firm.

Over the past 12 months, the benchmark price for a detached home in western Vancouver rose 10% to a record $2.28 million, according to the Real Estate Board of Greater Vancouver.

STATUS SYMBOLS

Getty ImagesA wealthy Chinese immigrant family inspect a villa in the high-class neighboorhood of West Vancouver. Realtors say Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more. Nowhere is the China effect more apparent than at the top end of the market.

An English-style estate on a one-acre lot in Vancouver’s exclusive First Shaughnessy neighborhood is on sale for $17.9 million and all 10 offers it has attracted so far are from ethnic Chinese buyers. All are either newcomers or those who have arrived in the past decade, according to the listing agent.

“It’s all about status,” said Sherry Chen, a realtor with Rampf-Anderson Real Estate Group, who deals mainly with wealthy clients from mainland China.

In most cases, these are “astronaut families” where the husband keeps working in Asia flying back and forth, while the wife establishes an education base for the children in Canada.

Close correlation between high-end property prices and the discontinued “millionaire visa” program for wealthy individuals has raised concerns that its termination this year could hurt the market. But prices seem to have recovered after a temporary dip, McDonald Realty’s Scarrow said, adding that property investors had several other ways of accessing the market.

The money flow has transformed the DNA of the city. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes.

The influx is also having a trickledown effect as people sell out in prime locations and move to other neighborhoods driving up prices and widening the gap between housing costs and the condition of the local economy.

“We are in this unprecedented situation right now in terms of housing prices and how quickly they’ve escalated. They’ve become completely disconnected from local incomes,” said Geoff Meggs, a Vancouver city councillor.

Vancouver has ranked the second least affordable major city after Hong Kong for the past three years in an annual survey by think-tank Demographia which tracks housing costs and incomes in top markets such as New York, Sydney, Singapore and London.

That raises fears of brain drain and concerns about the markets excessive reliance on foreign money.

“I think Vancouver faces challenges a number of cities are facing in the world,” said Yan. “And that is what does one do in this new environment of global capital and money flows.”

© Thomson Reuters 2014

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Canada building permits soar to record on Toronto, Vancouver condos

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Canadian building permits jumped to a surprise record in July, led by Toronto and Vancouver condominiums and apartments, at a time when the central bank says high home prices and indebted consumers remain a key risk to the economy.

The value of municipal permits for multi-unit housing jumped 43.4% to $2.54 billion, Statistics Canada said Monday in Ottawa. Total permits in Toronto rose 29.6% to $1.65 billion while Vancouver surged 46.1% to C$718 million.

Nationwide, permits rose 11.8% to $9.16 billion in July, confounding economists in a Bloomberg survey who forecast a 5% decline. Residential and non-residential permits both reached records, rising 18.0% and 5.2% respectively.

Bank of Canada policy makers said last week that risks posed by “imbalances” in household finances remain, as they kept their key interest rate at 1%. Home sales and prices have shown unexpected strength this year as the lowest mortgage rates in decades spur demand. Policy makers including Finance Minister Joe Oliver have singled out the surge in condominium construction in Toronto and Vancouver for concern.

Municipalities approved 14,050 multi-family housing units in July, a gain of 35.2% from June and 23.8% from a year earlier. The number of units approved for single-family residences fell 0.6% on the month to 6,461 units and rose by 1.3% from 12 months earlier.

“The gain in Toronto was driven by higher construction intentions for multi-family dwellings and, to a lesser extent, institutional buildings,” Statistics Canada said Monday. “The increase in Vancouver came mainly from multi-family dwellings.”

The gain in non-residential activity was led by government spending, rather than the business investment Bank of Canada Governor Stephen Poloz said is needed to bring about a sustainable recovery. Institutional spending rose 28.4%, while commercial projects rose 2.6% and industrial buildings dropped by 32.6%.
Bloomberg.com